HC grants opportunity for reply to SCN as Assessee being small businessman was not aware of the proceedings initiated

Last updated: 05 October 2024

Quick Summary

The Madras High Court has granted a small business owner a fresh opportunity to respond to a Show Cause Notice (SCN). The court recognised that the assessee, a small businessman, was unaware of the proceedings due to initial GST implementation errors. The original assessment order was quashed, but the assessee must first deposit 10% of the disputed tax amount.

Court :
Madras High Court

Brief :
The Hon'ble Madras High Court in the case of Tvl. Tripathi Packaging v. Deputy State Tax Officer, Madurai [W.P. (MD) No. 11734 of 2024 dated June 06, 2024], granted the Assessee a fresh opportunity to file reply to the Show Cause Notice ("the SCN")in case where the Assessee could not provide proper explanation to discrepancy raised as the Assessee was not aware of the proceedings initiated subject to the condition that the Assessee deposits 10% of the disputed tax amount confirmed in the assessment order.

Citation :
W.P. (MD) No. 11734 of 2024 dated June 06, 2024

The Hon'ble Madras High Court in the case of Tvl. Tripathi Packaging v. Deputy State Tax Officer, Madurai [W.P. (MD) No. 11734 of 2024 dated June 06, 2024], granted the Assessee a fresh opportunity to file reply to the Show Cause Notice ("the SCN")in case where the Assessee could not provide proper explanation to discrepancy raised as the Assessee was not aware of the proceedings initiated subject to the condition that the Assessee deposits 10% of the disputed tax amount confirmed in the assessment order.

Facts:

M/s. Tvl. Tripathi Packaging ("the Petitioner"), filed a writ petition against order dated December 26, 2023 ("the Impugned Order") passed by the State Tax Officer ("the Respondent"), which demanded tax and Interest. The Petitioner contended that the Input Tax Credit was wrongly claimed as Reverse Charge Mechanism in Form GSTR-3B instead of under Table 4A (5) due to errors made in the initial months after the implementation of GST. Thereafter, the Petitioner contended that being small enterprise, they were not aware of the SCN and personal hearing notice issued and therefore, be granted an opportunity to provide explanation regarding the discrepancy raised.

Held:

The Hon'ble Madras High Court in W.P. (MD) No. 11734 of 2024 held as under:

· Opined that, the Petitioner should be given an adequate opportunity to reply to the SCN in DRC-01 and submit supporting documents regarding the erroneous claim of ITC.

· Held that, the Impugned Order was quashed, and the Respondent was directed to issue a fresh order after the Petitioner deposited 10% of the disputed tax amount, thereby disposing the writ petition.

Our Comments:

It is pertinent to note that the Hon'ble Madras High Court in the case of Abhishek Suppliers v. Commercial Tax Officer, Chennai [Writ Petition No. 15133 of 2024 dated June 20, 2024] allowed the writ petition and held that the Assessment Order passed solely based on the fact that the taxpayer failed to file the reply is not tenable, and thereby, the opportunity should be granted to the Assessee to contest the tax demand on merits.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED

FAQ :

The Madras High Court granted Tvl. Tripathi Packaging an opportunity to reply to the Show Cause Notice (SCN) and submit supporting documents, quashing the original assessment order.

The order was quashed because the assessee, a small businessman, was not aware of the proceedings and therefore could not provide a proper explanation for the discrepancy raised.

The assessee must deposit 10% of the disputed tax amount confirmed in the assessment order.

The assessee incorrectly claimed Input Tax Credit (ITC) under Reverse Charge Mechanism in Form GSTR-3B instead of under Table 4A (5), due to errors in the initial months of GST implementation.

No, according to a related ruling by the Madras High Court, an assessment order passed solely because a taxpayer failed to file a reply is not tenable and an opportunity to contest the demand should be granted.